Market Report: Atlantic fog slows trade

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Image 1 of 2

By Benjamin Wootliff

12:00AM GMT 09 Jan 2001

TRADERS returned for the year's first full week of dealing in a fragile mood, with markets continuing their downward path.

The sharp slide in the US market on Friday - coming on top of Alan Greenspan's surprise cut in interest rates - led to a downbeat mood. Traders are confused and worried that there may be more bad news to come out of the US. The benchmark FTSE 100 index closed down 48.5 points at 6149.6, with most of the decline taking place after a weak opening in the US. In the late afternoon, the Dow Jones was down 38 points, and the Nasdaq was off about 60 points - almost 3pc.

ING equity strategist Tony Jackson said: "Until it is entirely clear what happened last week, with the surprising interest rate cut and the mysterious Bank of America suspension, the market will continue to mark time."

Hutchison Whampoa's decision to offload a slice of its Vodafone stake dominated the market. More than 660m Vodafone shares changed hands - almost a third of the 2.1 billion shares traded on the stock market yesterday. The shares slipped 14.5 - almost 6pc - to 227.75p, accounting for almost all of the FTSE 100's 48.5-point fall. The shares are now just above their 18-month low of 225p.

Meanwhile, a slump in the business support services sector left traders and analysts a little bemused. Rentokil Initial led the FTSE 100 decliners, falling 16.25 - more than 7pc - to 209.75p, after it sold its Personnel Services business for £23.5m. This was less than half of what some analysts had hoped for and cast doubts on the success of the remainder of the disposal programme.

Commerzbank analyst David Greenall said: "The market is worried about highly rated stocks - and Rentokil, along with Hays and Capita, is a highly rated stock." With the shares having surged last month, the news was a good excuse to take profits. Capita Group lost 19.5 to close at 437p, while Hays slid 5 to 365p.

The post-Christmas ranking of the high street retailers began yesterday. Sainsbury lost 10 to close at 367p on talk that its Christmas sales had been weak. This led to hopes that Safeway - up 10.5 to 311 - will issue a positive trading statement later this week. Meanwhile, Marks & Spencer shrugged off a profits downgrade from brokers Goldman Sachs to close up 10 to 210.5p.

Several technology stocks led the FTSE 100 leaderboard. ARM added 34 to close at 542p, following last week's endorsement by Intel, a recommendation in the weekend press, and expectations that the designer of chips for mobile phones has been oversold. Autonomy continued Friday's bounce-back, adding 94 to £16.29 after it announced that IBM had agreed to distribute its products.

Blue Circle's capitulation to Lafarge bucked up the rest of the building materials sector. RMC - which has been the target of bid speculation for several months - added 27 to close at 677p. Aggregate Industries rose 1 to 80.5p after it said trading was in line with expectations.

Power supply company Chloride added 12 to close at 183.5p. The company has been the subject of bid rumours, but traders attributed the jump to a "bear squeeze" and the successful sale of 450,000 shares in mid-afternoon. Music group EMI slipped 7 to 568p after the chairman of its erstwhile merger partner, BMG, said a deal could be completed by the end of this month.

Insurance software company The Innovation Group added 12.5 to close at 747.5p after it said it was trading ahead of expectations. The group also announced the acquisition of US company the Pyramid Group for $21.4m. Harry Potter cast a spell on the Character Group, up 9.5 to 39p, after it announced that it had the UK rights to sell merchandise endorsed by the aspirant wizard. The merchandiser's shares took a battering last year after it overstocked on Star Wars toys.

Enterprise Oil rose 18 to 588p on talk that it could be the target of a bid from either Canada's Talisman Energy or Anadarko Petroleum Corp. Following the sale of Lasmo to Italy's ENI, Enterprise is the last big independent UK oil company. Powergen added 17 to close at 612p, as rumours of a bid from Germany's E.ON overcame a downgrade from Deutsche Bank.

Huntingdon Life Sciences, the target of protests by anti-vivisection protestors for its experiments on live animals, slipped 0.25 to 2.75p after it said it had been offered a two-week lifeline to refinance its bank facilities. At their height at the beginning of 1997, the shares were worth 113p.

ITNET, the computer services company, rose 31.5 to 162.5p after it announced a £4.7m contract with Islington council - its first good news in months.